"The people who bought this product were companies that in many cases were banks—companies in Europe that had been making mortgages for over 100 years," Bove said. "These weren't retail buyers who didn't understand what they were doing."

Bove warned that such demonizing of large financial firms could have a devastating effect on the financial system similar to the collapse in 2008.

"The net effect is every aspect of what is occurring in the financial markets is being questioned, and the overlay is it's all crooked and the people in it are all greedy and involved in fraudulent things," he said. "That will cause people to pull money away. If they pull money away we will be right back where we were in the fourth quarter of 2008."

Like a number of others, Bove questioned the timing of the charges.

Congress is struggling to get a financial reform bill through, and some analysts are saying the Goldman case could be the kickoff for an intensified push. Bove noted that consumer protection portions of the bill had wide favor in Washington but those limiting proprietary trading and private equity were being less well-received.

"I don't think there is any such thing as coincidence. The fact that there was going to be debate on this bill was critically important," he said. "Something was needed to stimulate people on the other side of the bill, on the capital markets side of the bill to get through Congress. I think the timing was political."